It should come as no surprise that entrepreneurs can be a little precious about their businesses. After all, these professionals worked tirelessly for years — sacrificing blood, sweat, and tears — to get a business off the ground. And now they have to say goodbye.
So, even if an entrepreneur is technically “ready” to bow out, they might still cling to the start up that defined them for so many years. It’s hard to say goodbye, so here are some tips for how to gracefully take control of your new business while still respecting an owner who can’t let go.
The logistics of transferring ownership
The details of legally transferring ownership can get muddled depending on the type of business you’re buying. Take, for example, the logistical differences that exist when transferring the following:
- Sole proprietorship — Given this structure you can’t really “buy” the business, but instead you purchase all the assets (and liabilities) the owner possesses. As a result, the sole proprietorship dissolves and the new owner can use the assets to start a new business. In this circumstance, each asset is valued individually in order to finalize the contract.
- Partnerships — Under a partnership, ownership is divided among interested parties. When it comes time to transfer ownership to someone new, the operating agreement will have to be modified under the supervision of a legal professional. In some cases, the state will require notification of new ownership.
- Limited Liability Company — Within an LLC structure, each owner (or “member”) owns a percentage of the company. The operating agreement of the LLC specifies buy-sell provisions, and this agreement outlines the process transferring ownership if a member sells their share.
In general, the complications outlined above can be handled by a legal partner. But, even though a sales partner can help iron out the logistics that might trip up a transfer of ownership, just know that no one sale is the same.
In light of the incredible variability you’re about to experience, you might feel a little uneasy. That’s natural — buying a business comes with uncertainty, and that’s okay. What you can depend on, and what will remain steadfast no matter your sales circumstances, are the interpersonal best practices of transferring ownership. Here is where you can exert the most control: How you treat people during the transitional period.
Respectfully taking control
In most cases the integration process will be slow. There will likely be a transitional period in which the previous owner remains semi-involved as you get your footing. Don’t be hasty in taking over full control just yet. This transitional period is crucial for training and consultation purposes. If the business was worth buying in the first place then that means the previous owner has some degree of wisdom to impart, so take the time to listen.
But, how long is too long? Unfortunately, there is no one answer. Each business is different, and the required training period will vary depending on the complexity of your industry. What is universal no matter the circumstances is the criteria of a successful handoff. Here are a few of the best practices you should follow:
- Definitive handoff date: The transition window should be outlined in the sales contract. While this might seem a little pushy, it’s important to establish a hard-and-fast exit date to prevent any lingering. Even if you’re not 100 percent established, it’s important to take complete control by a certain date.
- Hands-on experience: Have you ever been trained by someone who teaches by doing? Meaning, someone does all the work for you in an attempt to instruct you, but in reality you stand idly by as they go about their business. This is common — not everyone is a great teacher. You have to learn through doing, so be sure to assert yourself and insist on hands-on experience.
- Get to know the employees: Sure it’s important to understand the administrative ins-and-outs of your new business, but all the pencil pushing in the world isn’t worth much if you don’t have a connection to your employees. As you transition into a leadership role, it’s natural for some longtime employees to be skeptical. It will take time for employees to respect you, so capitalize on this overlapping ownership window as an opportunity to establish yourself under the tutelage of the previous owner.
The transfer of ownership comes down to one thing: trust. As long as you follow the above, offer the same level of respect you expect to receive, and practice a little patience, you will be in good shape to take control of your next business.
Read More: Buying a Business? Look for These 7 Traits